<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9078
---------------------
THE ALPINE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-1620387
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1790 BROADWAY
NEW YORK, NEW YORK 10019-1412
(Address of principal (Zip code)
executive offices)
</TABLE>
Registrant's telephone number, including area code 212-757-3333
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 Days. Yes /X/ No / /
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<S> <C>
Class Outstanding at December 16, 1996
--------------------------- ------------------------------
Common Stock, $.10 Par Value 17,731,657
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the requirements of Form 10-Q and therefore do
not include all information and footnotes required by generally accepted
accounting principles. However, in the opinion of management, all adjustments
(which, except as disclosed elsewhere herein, consist only of normal recurring
accruals) necessary for a fair presentation of the results of operations for the
relevant periods have been made. Results for the interim periods are not
necessarily indicative of the results to be expected for the year.
2
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
APRIL 30,
1996
---------
OCTOBER 31,
1996
-----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 1,119 $ 77,427
Marketable securities................................................ 7,713 7,828
Accounts receivable (less allowance for doubtful accounts of:
April, $506; October $530)......................................... 60,670 63,125
Inventories.......................................................... 68,990 51,602
Other current assets................................................. 7,850 7,353
--------- -----------
Total current assets............................................... 146,342 207,335
Property, plant, and equipment, net.................................... 99,425 99,393
Long-term investments and other assets................................. 26,403 25,445
Goodwill (less accumulated amortization; April, $4,996; October
,$6,521)............................................................. 82,734 81,386
--------- -----------
Total assets....................................................... $ 354,904 $ 413,559
--------- -----------
--------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term obligation................................................ $ -- $ 24,243
Current portion of long-term debt.................................... 2,132 1,328
Accounts payable..................................................... 53,167 41,585
Accrued expenses..................................................... 40,364 64,729
--------- -----------
Total current liabilities.......................................... 95,663 131,885
--------- -----------
Long-term debt, less current portion................................... 207,645 191,666
--------- -----------
Other long-term liabilities............................................ 8,460 17,167
--------- -----------
Minority interest in subsidiary........................................ -- 7,748
--------- -----------
Commitments and contingencies
Stockholders' equity:
8% cumulative convertible preferred stock at liquidation value....... 9,831 1,831
9% cumulative convertible preferred stock at liquidation value....... 1,927 1,927
Common stock, $.10 par value; authorized 25,000,000 shares; issued:
April, 19,307,012 shares; October 18,406,053 shares................ 1,931 1,841
Capital in excess of par value....................................... 113,843 111,113
Cumulative translation adjustment.................................... (82) 293
Accumulated deficit.................................................. (78,998) (46,886)
--------- -----------
48,452 70,119
Less: Shares of common stock in treasury, at cost; April, 1,025,496
shares; October 674,396 shares..................................... (4,806) (4,516)
Receivable from stockholders......................................... (510) (510)
--------- -----------
Total stockholders' equity........................................... 43,136 65,093
--------- -----------
Total liabilities and stockholders' equity......................... $ 354,904 $ 413,559
--------- -----------
--------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Net sales................................................................................. $ 136,252 $ 154,019
Cost of goods sold........................................................................ 119,729 126,660
---------- ----------
Gross profit............................................................................ 16,523 27,359
Selling, general and administrative....................................................... 8,170 11,210
Amortization of goodwill.................................................................. 642 764
---------- ----------
Operating income........................................................................ 7,711 15,385
Interest income........................................................................... 324 189
Interest (expense)........................................................................ (6,768) (6,635)
Gain on sale of subsidiary stock.......................................................... -- 80,397
Other income (expense), net............................................................... 13 54
---------- ----------
Income from continuing operations before income taxes................................... 1,280 89,390
Provision for income taxes................................................................ (299) (42,116)
---------- ----------
Income from continuing operations....................................................... 981 47,274
Minority interest in earnings of subsidiary............................................... -- (333)
---------- ----------
Net income from continuing operations before extraordinary item......................... 981 46,941
Loss from discontinued operations......................................................... (1,834) --
---------- ----------
Net income (loss) before extraordinary item............................................. (853) 46,941
Extraordinary gain (loss) on early extinguishment of debt................................. 324 (13,412)
---------- ----------
Net income (loss)....................................................................... (529) 33,529
Preferred stock dividends................................................................. (313) (234)
Preferred stock redemption premium........................................................ -- (5,195)
---------- ----------
Income (loss) applicable to common stock................................................ $ (842) $ 28,100
---------- ----------
---------- ----------
Income (loss) per share of common stock:
Continuing operations................................................................... $ 0.04 $ 2.50
Discontinued operations................................................................. (0.11) --
Extraordinary gain (loss) on early extinguishment of debt............................... 0.02 (0.72)
Preferred stock redemption premium...................................................... -- (0.28)
---------- ----------
Net income (loss) per share of common stock........................................... $ (0.05) $ 1.51
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
4
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Net sales................................................................................. $ 265,036 $ 305,466
Cost of goods sold........................................................................ 232,185 254,143
---------- ----------
Gross profit............................................................................ 32,851 51,323
Selling, general and administrative....................................................... 16,072 21,000
Amortization of goodwill.................................................................. 1,315 1,525
---------- ----------
Operating income........................................................................ 15,464 28,798
Interest income........................................................................... 1,069 341
Interest (expense)........................................................................ (13,876) (13,609)
Gain on sale of subsidiary stock.......................................................... -- 80,397
Other income (expense), net............................................................... 127 (5)
---------- ----------
Income from continuing operations before income taxes................................... 2,784 95,922
Provision for income taxes................................................................ (449) (44,402)
---------- ----------
Income from continuing operations....................................................... 2,335 51,520
Minority interest in earnings of subsidiary............................................... -- (333)
---------- ----------
Net income from continuing operations before extraordinary item......................... 2,335 51,187
(Loss) from discontinued operations....................................................... (2,213) --
---------- ----------
Net income before extraordinary item.................................................... 122 51,187
Extraordinary (loss) on early extinguishment of debt...................................... (4,856) (13,412)
---------- ----------
Net income (loss)....................................................................... (4,734) 37,775
Preferred stock dividends................................................................. (667) (468)
Preferred stock redemption premium........................................................ -- (5,195)
---------- ----------
Income (loss) applicable to common stock................................................ $ (5,401) $ 32,112
---------- ----------
---------- ----------
Income (loss) per share of common stock:
Continuing operations................................................................... $ 0.10 $ 2.69
Discontinued operations................................................................. (0.13) --
Extraordinary loss on early extinguishment of debt...................................... (0.28) (0.71)
Preferred stock redemption premium...................................................... -- (0.28)
---------- ----------
Net income (loss) per share of common stock........................................... $ (0.31) $ 1.70
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
5
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED OCTOBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
9% CUMULATIVE
8% CUMULATIVE
CAPITAL CONVERTIBLE PREFERRED CONVERTIBLE PREFERRED
COMMON STOCK IN STOCK STOCK
----------------------- EXCESS OF ---------------------- ---------------------
SHARES AMOUNT PAR SHARES AMOUNT SHARES AMOUNT
------------ --------- ---------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1996.......... 19,307,012 $ 1,931 $ 113,843 1,927 $ 1,927 196,649 $ 9,831
Compensation expense related to
stock options and grants......... 43,571 5 1,628
Dividends on preferred stock.......
Foreign currency translation.......
Exercise of stock options.......... 55,470 5 212
Purchase of treasury stock.........
Retirement of treasury stock....... (1,000,000) (100) (4,570)
Redemption of preferred stock...... (160,000) (8,000)
Preferred stock redemption
premium..........................
Net income for the six months ended
October 31, 1996.................
------------ --------- ---------- ----- --------- ---------- ---------
Balance at October 31, 1996........ 18,406,053 $ 1,841 $ 111,113 1,927 $ 1,927 36,649 $ 1,831
------------ --------- ---------- ----- --------- ---------- ---------
------------ --------- ---------- ----- --------- ---------- ---------
<CAPTION>
FOREIGN TREASURY STOCK RECEIVABLE
ACCUMULATED CURRENCY ---------------------- FROM
DEFICIT TRANSLATION SHARES AMOUNT STOCKHOLDERS TOTAL
------------ ------------- ----------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1996.......... $ (78,998) $ (82) (1,025,496) $ (4,806) $ (510) $ 43,136
Compensation expense related to
stock options and grants......... 1,633
Dividends on preferred stock....... (468) (468)
Foreign currency translation....... 375 375
Exercise of stock options.......... 217
Purchase of treasury stock......... (648,900) (4,380) (4,380)
Retirement of treasury stock....... 1,000,000 4,670 --
Redemption of preferred stock...... (8,000)
Preferred stock redemption
premium.......................... (5,195) (5,195)
Net income for the six months ended
October 31, 1996................. 37,775 37,775
------------ ----- ----------- --------- ----- ---------
Balance at October 31, 1996........ $ (46,886) $ 293 (674,396) $ (4,516) $ (510) $ 65,093
------------ ----- ----------- --------- ----- ---------
------------ ----- ----------- --------- ----- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
6
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
-----------------------
1995 1996
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income from continuing operations.................................................. $ 2,335 $ 51,187
Adjustments to reconcile income to net cash provided by continuing operations:
Depreciation and amortization........................................................ 6,022 6,868
Amortization of deferred financing costs and accretion of debt discount.............. 1,163 1,271
Compensation expense related to stock options and grants............................. 129 1,633
Provision for deferred taxes......................................................... -- 9,651
Change in assets and liabilities:
Accounts receivable.................................................................. 954 (2,455)
Inventories.......................................................................... 14,771 17,388
Other current assets................................................................. 1,784 497
Other assets......................................................................... 2,322 1,920
Accounts payable and accrued expenses................................................ 4,820 12,783
Other liabilities.................................................................... (164) (1,644)
----------- ----------
Cash provided by continuing operating activities......................................... 34,136 99,099
----------- ----------
(Loss) from discontinued operations...................................................... (2,213) --
Adjustments to reconcile loss to net cash (used for) discontinued operations:
Increase (decrease) in net liabilities................................................. 1,300 --
Other.................................................................................. 179 --
----------- ----------
Cash (used for) discontinued operations.................................................. (734) --
----------- ----------
Cash provided by operating activities.................................................... 33,402 99,099
----------- ----------
Cash flows from investing activities:
Acquisitions, net of cash acquired..................................................... (103,409) --
Minority investment in subsidiary...................................................... -- 7,748
Investment in marketable securities.................................................... (4,781) (115)
Capital expenditures................................................................... (3,268) (5,213)
Loans to PolyVision Corporation........................................................ (4,306) (996)
Other.................................................................................. (250) (178)
----------- ----------
Cash provided by investing activities.................................................... (116,014) 1,246
----------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
-----------------------
1995 1996
----------- ----------
<S> <C> <C>
Cash flows from financing activities:
Repayments of short-term borrowings.................................................... $ (21,000) $ --
Short term obligation.................................................................. -- 24,243
Borrowings under revolving credit facilities, net...................................... 17,339 65,192
Dividends on preferred stock........................................................... (354) (468)
Capitalized financing costs............................................................ (13,699) (4,050)
Purchase of treasury shares............................................................ (1,579) (4,380)
Proceeds from exercise of stock options................................................ 91 217
Redemption of preferred stock.......................................................... -- (13,195)
Repayments on long-term debt........................................................... (189,669) (91,596)
Long-term borrowings................................................................... 280,357 --
----------- ----------
Cash provided by (used for) financing activities......................................... 71,486 (24,037)
----------- ----------
Net increase (decrease) in cash and cash equivalents..................................... (11,126) 76,308
Cash and cash equivalents at beginning of period......................................... 15,546 1,119
----------- ----------
Cash and cash equivalents at end of period............................................... $ 4,420 $ 77,427
----------- ----------
----------- ----------
Supplemental disclosures:
Taxes paid............................................................................. $ 329 $ 2,803
----------- ----------
----------- ----------
Interest paid.......................................................................... $ 6,885 $ 14,375
----------- ----------
----------- ----------
Non-cash investing and financing activities:
Conversion of preferred stock into common stock........................................ $ 3,500
-----------
-----------
Dividend on preferred stock converted.................................................. $ 378
-----------
-----------
Conversion of notes into common stock.................................................. $ 300
-----------
-----------
Acquisition of business:
Assets, net of cash acquired........................................................... $ 126,127
Liabilities assumed.................................................................... (22,718)
-----------
Net cash paid.......................................................................... $ (103,409)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
The Alpine Group, Inc. ("Alpine" or the "Company") reflect all adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results of operations for the interim periods presented. These financial
statements should be read in conjunction with the summary of accounting policies
and the notes to the financial statements included in the Company's Annual
Report on Form 10-K for the year ended April 30, 1996.
Certain reclassifications have been made to the October 31, 1995 financial
statements to conform with the October 31, 1996 presentation.
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1996
--------- -----------
<S> <C> <C>
Raw materials......................................................... $ 14,885 $ 13,235
Work in process....................................................... 14,870 10,717
Finished goods........................................................ 39,235 27,650
--------- -----------
$ 68,990 $ 51,602
--------- -----------
--------- -----------
</TABLE>
3. LONG-TERM INVESTMENTS AND OTHER ASSETS
The components of long-term investments and other assets are:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1996
--------- -----------
<S> <C> <C>
Investment in PolyVision.............................................. $ 11,502 $ 11,502
Advances to PolyVision................................................ 3,086 4,082
Deferred financing charges............................................ 8,483 7,114
Other assets.......................................................... 3,332 2,747
--------- -----------
$ 26,403 $ 25,445
--------- -----------
--------- -----------
</TABLE>
4. INCOME (LOSS) PER SHARE
Income (loss) per common share is determined by dividing net income (loss)
attributable to common stock by the weighted average number of common shares,
and when dilutive, common equivalent shares outstanding. Net income (loss)
attributable to common stock is determined by deducting preferred stock
dividends and the preferred stock redemption premium (see note 7) from net
income (loss). The weighted average number of common and common equivalent
shares outstanding used in computing income (loss) per share for the six months
ended October 31, 1995 and 1996 was 17,375,279 and 18,887,320, respectively.
9
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
(UNAUDITED)
5. SALE OF SUBSIDIARY STOCK
On October 2, 1996, the Company completed a reorganization and refinancing
(the "Reorganization") of its wholly-owned subsidiaries, Superior
Telecommunication, Inc. ("Superior") and DNE Systems, Inc. ("DNE"). In
connection with the Reorganization, the Company (i) recapitalized Superior by
issuing to Alpine 20,000 shares of 6% Cumulative Preferred Stock ("Superior
Preferred Stock"), par value $1.00 per share, with a liquidation preference of
$1,000 per share, (ii) caused Superior and DNE to declare a dividend to Alpine
of $117.1 million, (iii) contributed all of the common stock of both Superior
and DNE to a newly-formed wholly-owned subsidiary, Superior TeleCom, Inc.
("Superior TeleCom"), and (iv) caused Superior TeleCom to enter into a revolving
credit facility (the "Credit Facility") (see Note 6), the proceeds of which were
used to repay the intercompany debt then owed to Alpine and to pay $63.8 million
of the declared dividend.
On October 17, 1996, Superior TeleCom sold 6,000,000 shares of its common
stock through an initial public offering at $16.00 per share. Superior TeleCom
used the net proceeds of approximately $88.3 million to fund the repayment of
$34.4 million of the aforementioned Credit Facility and to pay the remaining
balance on the previously declared dividend. As a result of the offering, the
Company's ownership interest in Superior TeleCom declined to 50.1% and the
Company recorded a gain of $80.4 million ($41.4 million, or $2.22 per share,
after provision for current and deferred income taxes).
In November 1996, the underwriters of the initial public offering exercised
their overallotment option to purchase an additional 900,000 shares of Superior
TeleCom common stock at $16.00 per share. Superior TeleCom used the net proceeds
of approximately $13.3 million to repurchase 450,000 shares of its common stock
for approximately $8.1 million with the balance of such proceeds being used to
reduce the amount outstanding under the Credit Facility. The Superior TeleCom
common stock repurchased was then transferred to the Company in exchange for
$8.1 million in liquidation value of Superior Preferred Stock. After giving
effect to the exercise of the overallotment option and the subsequent repurchase
and exchange of the Superior TeleCom common stock, the Company's ownership
interest in Superior TeleCom remaines at 50.1%.
6. DEBT
In October 1996, the Company completed a refinancing of a substantial
portion of its debt. Such refinancing included (i) repayment and termination of
the Company's existing revolving credit facility (with a balance of $48.5
million on the date of repayment) and (ii) the redemption, at a premium, of
$86.6 million face amount ($80.0 million recorded value) of the Company's 12.25%
Senior Secured Notes (the "Senior Notes"). The funds utilized to complete the
aforementioned refinancing included approximately $120.0 from net borrowings
under the Credit Facility (see Note 5), with the balance being funded by a
portion of the net proceeds from the initial public offering of Superior TeleCom
common stock (see Note 5).
In connection with the aforementioned refinancing, the Company recognized an
after tax extraordinary charge of $13.2 million, or $0.72 per share, on the
early extinguishment of debt, representing the premium paid on the redemption of
the Senior Notes, prepayment penalties related to termination of the existing
revolving credit facility, and the associated write-off of the unamortized
portion of deferred loan fees related to the debt extinguished.
In November 1996, the Company redeemed at a premium an additional $18.7
million aggregate face amount of Senior Notes ($17.3 million recorded value). In
connection with this transaction, the Company
10
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
(UNAUDITED)
6. DEBT (CONTINUED)
will recognize during the quarter ending January 31, 1997, an after tax
extraordinary charge of approximately $2.4 million.
At April 30, 1996 and October 31, 1996, long-term debt consisted of the
following:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1996
---------- -----------
<S> <C> <C>
12.25% Senior Secured Notes (face value $66,347,000 at October 31,
1996) (a).......................................................... $ 141,070 $ 61,414
Alpine revolving credit facility..................................... 48,654 --
Superior TeleCom revolving credit facility (b)....................... -- 113,458
10% Convertible Senior Subordinated Notes............................ 804 --
Adience 11% Senior Secured Notes (c)................................. 4,674 4,700
Mortgage loan (d).................................................... 4,996 3,977
Lease finance obligations (e)........................................ 5,853 5,810
Other................................................................ 3,726 3,635
---------- -----------
Total debt....................................................... 209,777 192,994
Less:current portion of long-term debt............................... 2,132 1,328
---------- -----------
Long-term debt................................................... $ 207,645 $ 191,666
---------- -----------
---------- -----------
</TABLE>
The aggregate maturities of long-term debt for the five years subsequent to
October 31, 1996, are as follows (in thousands):
<TABLE>
<S> <C>
1997.............................................................. $ 1,328
1998.............................................................. 997
1999.............................................................. 794
2000.............................................................. 630
2001.............................................................. 115,326
</TABLE>
- ------------------------
(a) The Senior Notes are due 2003 and pay interest semiannually on January 15
and July 15 of each year. The Senior Notes were issued at a price of 91.74%
and the discount is being added to the recorded amount through maturity
utilizing the effective interest method. The Senior Notes are guaranteed by
Adience, are secured by a pledge of the common stock of Adience and Superior
TeleCom and the Superior Preferred Stock held by the Company.
(b) Interest on the Credit Facility is payable quarterly based upon the prime
rate plus 0.5% or the Eurodollar rate plus 1.5%. The variable components of
these rates are subject to periodic adjustment after October 1997 based on
the ratio of debt to cash flow (as defined). The Credit Facility has a five-
year term with a total commitment of $150.0 million which is reduced by
$25.0 million in October 1999 and October 2000. Loans under the Credit
Facility are guaranteed by Superior TeleCom's subsidiaries (but not by
Alpine) and are secured by substantially all of the assets of Superior
TeleCom and by the stock of each of Superior TeleCom's subsidiaries.
(c) The Adience 11% Senior Secured Notes are due in 2002 and are redeemable at
the option of Adience after December 15, 1997 and pay interest semi-annually
on June 15 and December 15. The Adience Senior Notes are secured by a lien
on substantially all of the assets of Adience.
11
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
(UNAUDITED)
6. DEBT (CONTINUED)
(d) The mortgage loan is payable by DNE to the Connecticut Development
Authority. The loan is guaranteed by Alpine and Superior TeleCom and
collateralized by DNE's real estate, machinery and equipment. The loan is
payable March 2002 and is subject to a 20-year amortization schedule. The
interest rate is 7.25% through February 28, 1999 and the higher of 7.25% or
the yield on U.S. Treasury securities with the same maturity thereafter.
(e) The lease finance obligations result from the sale/leaseback of two
properties during fiscal 1994 which, because of the Company's continuing
involvement in the form of repurchase options, have been recorded under the
finance method. The lease finance obligations at October 31, 1996 consist
of: (a) $5.0 million related to the sale/leaseback of a Superior
manufacturing facility and (b) $810,000 related to the sale/leaseback of a
manufacturing facility previously owned by DNE.
7. REDEMPTION OF PREFERRED STOCK
On October 31, 1996 the Company entered into an agreement to repurchase for
$13.2 million, 160,000 shares of the Company's 8% Cumulative Convertible Senior
Preferred Stock ("8% Preferred Stock"), with a par value of $8.0 million. In
accordance with generally accepted accounting principles, the repurchase price
paid in excess of the preferred stock par value has been recorded as a
redemption premim and, therefore, a reduction of net income attributable to
common stockholders.
8. COMMITMENTS AND CONTINGENCIES
Adience's J.H. France unit, which was merged into Adience in December 1991,
has been named as party in approximately 3,000 pending lawsuits, some of which
contain both multiple claimants and multiple defendants, filed in 12
jurisdictions principally by employees and former employees of certain customers
of J.H. France, alleging in certain cases that a single product, a plastic
insulating cement manufactured more than 20 years ago by J.H. France, caused
them to suffer from asbestosis related diseases and in other cases alleging that
products manufactured or sold by J.H. France, caused silica related diseases.
The majority of the lawsuits seek monetary damages ranging from $20,000 to $1.0
million each. J.H. France and its insurance carrier have historically settled
these lawsuits, typically for an average amount per case of less than the
minimum amount stated. Punitive damages have also been claimed in some cases.
In addition to the lawsuits against J.H. France, Adience, as successor in
interest to BMI, has been named a party in approximately 390 pending lawsuits,
some of which contain both multiple claimants and multiple defendants, filed in
the States of Pennsylvania, Ohio, Michigan, West Virginia, Wisconsin, Kentucky
and Indiana and North Dakota, principally by employees and former employees of
certain customers of Adience alleging that products produced by Adience caused
silicosis, not asbestosis, in such persons. The majority of such lawsuits seek
unstated monetary damages ranging from $20,000 each, which is the minimal
jurisdictional requirement for personal injury cases in a majority of such state
courts, to $1.0 million each. Adience and its insurance carriers have
historically settled these lawsuits for an average amount per case of less than
the minimum amount stated. Virtually all such claims and all costs of defense
for these cases are covered by insurance.
The insurance companies which had issued policies covering the J.H. France
cases initially denied coverage for these claims. In June 1990, the Supreme
Court of Pennsylvania held that the insurance policies covering the claims in
these J.H. France cases covered liabilities and defense costs up to the amounts
of the limits of the respective policies, without regard to the period of time
said policies were in
12
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
(UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
effect. As a result of this judicial determination and based upon Adience's
experience in obtaining dismissals or settlements in closed cases, the Company
anticipates, although no assurance can be given, that the expected costs and
liabilities in such pending cases will be adequately covered by insurance and
that the aggregate limits on the insurance policies in effect exceed the
liabilities and defense costs which will be incurred in the 3,000 J.H. France
cases and the other 390 cases, for which the scope of coverage has never been an
issue.
Adience's Furnco unit has been named as the sole defendant in eight separate
lawsuits, each of which contains one plaintiff (i.e., either husband or husband
and wife). While the investigation continues as to the nature and extent of such
suits, Furnco's insurance carrier has agreed, subject to reservation rights, to
pay the reasonable and necessary costs incurred by Furnco in defense of these
lawsuits.
Alpine is subject to other legal proceedings and claims which have primarily
arisen in the ordinary course of business and have not been finally adjudicated.
In the opinion of management, based on its examination of such matters and
discussions with counsel, the ultimate resolution of all pending or threatened
litigation, claims and assessments will have no material adverse effect upon
Alpine's consolidated financial position, liquidity or results of operations.
9. SUBSIDIARY GUARANTY
The Senior Notes are fully and unconditionally guaranteed on a senior
secured basis by Adience; however, such guarantee is subordinated in right of
payment to Adience's 11% Senior Secured Notes outstanding. The subsidiary
guarantee ranks pari passu in right of payment with other senior debt of Alpine
and other senior debt of Adience.
There are no contractual restrictions on the ability of Adience to make
distributions to Alpine to service indebtedness, including interest payments on
the Senior Notes. Separate financial statements and related disclosures for
Adience are included herein as an exhibit. The following condensed consolidating
information presents condensed balance sheets as of April 30, 1996 and October
31, 1996 and condensed statements of operations and cash flows for the six
months ended October 31, 1995 and 1996 of (a) Alpine on a parent company basis
with its investment in Adience accounted for under the equity method (Parent
Company), (b) the subsidiary guarantor (Adience), (c) the combined subsidiary
non-guarantors, and (d) Alpine on a consolidated basis.
13
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF APRIL 30, 1996
------------------------------------------------------------------
PARENT SUBSIDIARY SUBSIDIARY ELIMINATING
COMPANY GUARANTOR NON-GUARANTORS ENTRIES CONSOLIDATED
--------- ----------- --------------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets............................. $ 8,924 $ 28,321 $ 113,585 $ (4,488) $ 146,342
Property, plant and equipment, net......... 146 21,916 77,363 -- 99,425
Goodwill, net.............................. -- 37,684 48,877 (3,827) 82,734
Investment in and advances to
subsidiaries............................. 217,564 (58,883) (104,654) (54,027) --
Other non-current assets................... 23,666 1,600 1,137 -- 26,403
--------- ----------- --------------- ----------- ------------
Total assets............................. $ 250,300 $ 30,638 $ 136,308 $ (62,342) $ 354,904
--------- ----------- --------------- ----------- ------------
--------- ----------- --------------- ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........................ $ 12,413 $ 25,602 $ 58,863 $ (1,215) $ 95,663
Long-term debt............................. 189,847 6,179 11,619 -- 207,645
Other non-current liabilities.............. 4,904 2,649 8,722 (7,815) 8,460
Equity..................................... 43,136 (3,792) 57,104 (53,312) 43,136
--------- ----------- --------------- ----------- ------------
Total liabilities and stockholders'
equity................................. $ 250,300 $ 30,638 $ 136,308 $ (62,342) $ 354,904
--------- ----------- --------------- ----------- ------------
--------- ----------- --------------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 1996
------------------------------------------------------------------
PARENT SUBSIDIARY SUBSIDIARY ELIMINATING
COMPANY GUARANTOR NON-GUARANTORS ENTRIES CONSOLIDATED
--------- ----------- --------------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets............................. $ 81,415 $ 34,905 $ 95,503 $ (4,488) $ 207,335
Property, plant and equipment, net......... 575 21,629 77,189 -- 99,393
Goodwill, net.............................. -- 37,525 47,687 (3,826) 81,386
Investment in and advances to
subsidiaries............................. 99,363 (69,187) (21,220) (8,956) --
Other non-current assets................... 19,022 1,685 5,238 (500) 25,445
--------- ----------- --------------- ----------- ------------
Total assets............................. $ 201,714 $ 26,557 $ 204,397 $ (17,385) $ 413,559
--------- ----------- --------------- ----------- ------------
--------- ----------- --------------- ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........................ $ 60,998 $ 22,501 $ 50,599 $ (2,213) $ 131,885
Long-term debt............................. 61,537 5,981 124,148 -- 191,666
Other non-current liabilities.............. 4,999 2,180 8,160 1,828 17,167
Minority interest in subsidiary............ 7,748 -- -- -- 7,748
Equity..................................... 65,093 (4,105) 21,490 (17,385) 65,093
--------- ----------- --------------- ----------- ------------
Total liabilities and stockholders'
equity................................. $ 200,375 $ 26,557 $ 204,397 $ (17,770) $ 413,559
--------- ----------- --------------- ----------- ------------
--------- ----------- --------------- ----------- ------------
</TABLE>
14
<PAGE>
THE ALPINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED OCTOBER 31, 1995
----------------------------------------------------------------------
PARENT SUBSIDIARY SUBSIDIARY ELIMINATING
COMPANY GUARANTOR NON-GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales..................................... $ 50,682 $ 214,354 $ 265,036
Cost of goods sold............................ 40,070 192,115 232,185
----------- ---------------
Gross profit................................ 10,612 22,239 32,851
Selling, general and administrative expenses.. $ 2,101 6,162 7,809 16,072
Amortization of goodwill...................... 623 692 1,315
----------- ----------- --------------- ------------
Operating income............................ (2,101) 3,827 13,738 15,464
Interest (expense), net....................... (7,351) (1,942) (3,514) (12,807)
Other income (expense)........................ 103 -- 24 127
Intercompany interest......................... 6,718 (2,073) (4,645) --
----------- ----------- --------------- ------------
Income from continuing operations before
income taxes.............................. (2,631) (188) 5,603 2,784
Equity in income from subsidiaries............ 664 -- -- $ (664) --
----------- ----------- --------------- ------ ------------
(1,967) (188) 5,603 (664) 2,784
Provision for income tax (expense) benefit.... 2,365 -- (2,814) -- (449)
----------- ----------- --------------- ------ ------------
Income from continuing operations........... 398 (188) 2,789 (664) 2,335
(Loss) from discontinued operations........... (2,213) -- -- -- (2,213)
----------- ----------- --------------- ------ ------------
Income before extraordinary item............ (1,815) (188) 2,789 (664) 122
Extraordinary (loss) on early extinguishment
of debt..................................... (2,919) (158) (1,779) -- (4,856)
----------- ----------- --------------- ------ ------------
Net income (loss)........................... $ (4,734) $ (346) $ 1,010 $ (664) $ (4,734)
----------- ----------- --------------- ------ ------------
----------- ----------- --------------- ------ ------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED OCTOBER 31, 1996
--------------------------------------------------------------------
PARENT SUBSIDIARY SUBSIDIARY ELIMINATING
COMPANY GUARANTOR NON-GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales..................................... $ 52,369 $ 253,097 $ 305,466
Cost of goods sold............................ 41,377 212,766 254,143
----------- ---------------
Gross profit................................ 10,992 40,331 51,323
Selling, general and administrative expenses.. $ 4,890 6,569 9,541 21,000
Amortization of goodwill...................... -- 662 863 1,525
----------- ----------- --------------- ------------
Operating income (loss)..................... (4,890) 3,761 29,927 28,798
Interest (expense), net....................... (11,289) (479) (1,500) (13,268)
Other (expense)............................... 172 (8) (169) (5)
Gain on sale of subsidiary stock.............. 80,397 -- -- 80,397
Intercompany interest......................... 10,344 (3,935) (6,409) --
----------- ----------- --------------- ------------
Income (loss) from continuing operations
before income taxes....................... 74,734 (661) 21,849 95,922
Equity in income of subsidiaries.............. 12,412 -- -- $ (12,412) --
----------- ----------- --------------- ----------- ------------
87,146 (661) 21,849 (12,412) 95,922
Provision for income tax (expense) benefit.... (35,626) -- (8,776) (44,402)
----------- ----------- --------------- ----------- ------------
Income from continuing operations........... 51,520 (661) 13,073 (12,412) 51,520
Minority interest in subsidiary............... (333) -- -- -- (333)
----------- ----------- --------------- ----------- ------------
Income before extraordinary item.............. 51,187 (661) -- (12,412) 51,187
Extraordinary (loss) on early extinguishment
of debt..................................... (13,412) -- -- -- (13,412)
----------- ----------- --------------- ----------- ------------
Net income (loss)........................... $ 37,775 $ (661) $ 13,073 $ (12,412) $ 37,775
----------- ----------- --------------- ----------- ------------
----------- ----------- --------------- ----------- ------------
</TABLE>
15
<PAGE>
THE ALPINE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED OCTOBER 31, 1995
-------------------------------------------------------------------
PARENT SUBSIDIARY SUBSIDIARY NON- ELIMINATING
COMPANY GUARANTOR GUARANTORS ENTRIES CONSOLIDATED
---------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Income from operations..................... $ (266) $ (290) $ 2,891 $ 2,335
Adjustments to reconcile income to net cash
provided by operations:
Depreciation, amortization and other
non-cash charges......................... 726 2,087 4,501 7,314
Changes in assets and liabilities.......... 5,737 (7,883) 26,633 24,487
Cash used for discontinued operations...... (734) - (734)
---------- ----------- --------------- ----------- ------------
Cash flows provided by (used for) operating
activities................................. 5,463 (6,086) 34,025 33,402
---------- ----------- --------------- ----------- ------------
Cash flows from investing activities:
Acquisition, net of cash................... (326) (103,083) (103,409)
Investments in marketable securities....... (4,781) (4,781)
Capital expenditures....................... (41) (1,111) (2,116) (3,268)
Investment in PolyVision................... (4,306) (4,306)
Other...................................... (1,350) (139) 1,239 (250)
---------- ----------- --------------- ----------- ------------
Cash flows provided by (used for) investing
activities................................. (10,804) (1,250) (103,960) (116,014)
---------- ----------- --------------- ----------- ------------
Cash flows from financing activities:
Long-term borrowings....................... 140,357 140,000 280,357
Repayments of long-term borrowings......... (1,701) (40,200) (147,768) (189,669)
Repayments of short-term borrowings........ (21,000) (21,000)
Intercompany transactions.................. (157,723) 59,973 97,750 --
Borrowings (repayments) under revolving
credit facilities, net................... 45,859 (12,434) (16,086) 17,339
Other...................................... (12,326) (3,215) (15,541)
---------- ----------- --------------- ----------- ------------
Cash flows provided by (used for) financing
activities................................. (6,534) 7,339 70,681 71,486
---------- ----------- --------------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents................................ (11,875) 3 746 (11,126)
---------- ----------- --------------- ----------- ------------
Cash and cash equivalents at the beginning of
the period................................. 13,299 24 2,223 15,546
---------- ----------- --------------- ----------- ------------
Cash and cash equivalents at the end of the
period..................................... $ 1,424 $ 27 $ 2,969 $ 4,420
---------- ----------- --------------- ----------- ------------
---------- ----------- --------------- ----------- ------------
</TABLE>
16
<PAGE>
THE ALPINE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED OCTOBER 31, 1996
--------------------------------------------------------------------
PARENT SUBSIDIARY SUBSIDIARY NON- ELIMINATING
COMPANY GUARANTOR GUARANTORS ENTRIES CONSOLIDATED
----------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Income from operations...................... $ 39,108 $ (661) $ 13,073 $ 51,520
Adjustments to reconcile income to net cash
provided by operations:
Depreciation, amortization and other
non-cash charges.......................... 8,844 2,321 4,710 15,875
Gain on sale of subsidiary stock............ (80,397) (80,397)
Changes in assets and liabilities........... 29,833 (8,289) 7,596 29,140
----------- ----------- --------------- ----------- ------------
Cash flows provided by (used for) operating
activities.................................. (2,612) (6,629) 25,379 16,138
----------- ----------- --------------- ----------- ------------
Cash flows from investing activities:
Investments in marketable securities........ (115) (115)
Capital expenditures........................ (484) (1,252) (3,477) (5,213)
Investment in PolyVision.................... (996) (996)
Proceeds from stock offering................ 88,280 88,280
Other....................................... (169) (9) (178)
----------- ----------- --------------- ----------- ------------
Cash flows (used for) investing activities.... (1,595) (1,421) 84,794 81,778
----------- ----------- --------------- ----------- ------------
Cash flows from financing activities:
Long-term borrowings........................
Repayments of long-term borrowings.......... (88,042) (131) (994) (89,167)
Short-term borrowings....................... 24,243 24,243
Intercompany transactions................... 99,077 7,869 (106,946)
Borrowings (repayments) under revolving
credit facilities, net.................... (58,101) 123,293 65,192
Other....................................... 99,303 (121,179) (21,876)
----------- ----------- --------------- ----------- ------------
Cash flows provided by (used for) financing
activities.................................. 76,480 7,738 (105,826) (21,608)
----------- ----------- --------------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents................................. 72,273 (312) 4,347 76,308
----------- ----------- --------------- ----------- ------------
Cash and cash equivalents at the beginning of
the period.................................. 683 367 69 1,119
----------- ----------- --------------- ----------- ------------
Cash and cash equivalents at the end of the
period...................................... $ 72,956 $ 55 $ 4,416 $ 77,427
----------- ----------- --------------- ----------- ------------
----------- ----------- --------------- ----------- ------------
</TABLE>
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
LIQUIDITY AND CAPITAL RESOURCES
The Alpine Group, Inc. ("Alpine" or the "Company), through its subsidiaries,
Superior TeleCom Inc. ("Superior TeleCom") and Adience Inc. (which operates
under the trade name "BMI-France"), operates in three industry segments.
Superior TeleCom, a 50.1% owned subsidiary (see Note 5 to the accompanying
consolidated financial statements) operates in the following industry segments:
(i) telecommunications distribution wire and cable products through its
wholly-owned subsidiary, Superior Telecommunication Inc. ("Superior"), and (ii)
data communications and electronics products and systems for defense,
governmental and commercial applications through its wholly-owned subsidiary DNE
Systems, Inc. ("DNE"). BMI-France provides specialty refractory products and
services for the iron, steel, glass, aluminum, cement and cogeneration
industries.
As used herein, "fiscal 1996" refers to the fiscal year ended April 30, 1996
and "fiscal 1997" refers to the fiscal year ending April 30, 1997.
RESULTS OF OPERATIONS
The following table compares operating statement data for Alpine on an
industry segment basis. Such industry segment operating data is presented on an
historical reporting basis for the three month and six month periods ended
October 31, 1995 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER OCTOBER
---------------------- ----------------------
1995 1996 1995 1996
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales
Telecommunications wire and cable.............................. $ 102,957 $ 116,887 $ 197,016 $ 234,856
Data communications and electronics............................ 6,119 6,039 11,384 11,894
Refractories................................................... 27,176 31,093 56,636 58,716
---------- ---------- ---------- ----------
Consolidated............................................... 136,252 154,019 265,036 305,466
Gross profit
Telecommunications wire and cable.............................. $ 9,180 $ 18,949 $ 17,090 $ 35,808
Data communications and electronics............................ 1,860 1,636 3,453 3,154
Refractories................................................... 5,483 6,774 12,308 12,361
---------- ---------- ---------- ----------
Consolidated............................................... 16,523 27,359 32,851 51,323
Gross margin percentage
Telecommunications wire and cable.............................. 8.9% 16.2% 8.7% 15.3%
Data communications and electronics............................ 30.4% 27.1% 30.3% 26.5%
Refractories................................................... 20.2% 21.8% 21.7% 21.0%
---------- ---------- ---------- ----------
Consolidated............................................... 12.1% 17.8% 12.4% 16.8%
Selling, general and administrative
Telecommunications wire and cable.............................. $ 1,889 $ 2,745 $ 3,605 $ 5,067
Data communications and electronics............................ 1,499 1,700 3,082 3,266
Refractories................................................... 3,630 3,763 7,284 7,719
Corporate and other expenses................................... 1,152 3,002 2,101 4,948
---------- ---------- ---------- ----------
Consolidated............................................... 8,170 11,210 16,072 21,000
Amortization of goodwill
Telecommunications wire and cable.............................. $ 330 $ 431 $ 692 $ 863
Refractories................................................... 312 333 623 662
---------- ---------- ---------- ----------
Consolidated............................................... 642 764 1,315 1,525
Operating income
Telecommunications wire and cable.............................. $ 6,961 $ 15,773 $ 12,793 $ 29,878
Data communications and electronics............................ 361 (64) 371 (112)
Refractories................................................... 1,541 2,678 4,401 3,980
Corporate and other expenses................................... (1,152) (3,002) (2,101) (4,948)
---------- ---------- ---------- ----------
Consolidated............................................... 7,711 15,385 15,464 28,798
---------- ---------- ---------- ----------
</TABLE>
18
<PAGE>
SUPPLEMENTAL DATA FOR THE TELECOMMUNICATION WIRE AND CABLE SEGMENT:
Copper is a significant raw material component of Superior's finished
products. Fluctuations in the price of copper affect per unit product pricing
and related revenues. However, the cost of copper has not had a material impact
of Superior's profitability due to contractually mandated copper-based price
contracts contained in Superior's customer sales agreements. The Company
believes that the following supplemental comparative data, which is based upon a
constant copper cost of $1.00 per pound for the indicated periods provides
additional meaningful information concerning Superior's sales and its gross
margin percentage.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER OCTOBER
---------------------- ----------------------
1995 1996 1995 1996
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales....................................................... $ 92,369 $ 113,152 $ 177,718 $ 224,659
Gross profit................................................... 9,180 18,949 17,090 35,808
Gross margin percentage-....................................... 9.9% 16.7% 9.6% 15.9%
</TABLE>
NET SALES
Consolidated net sales for the three month period ended October 1996 were
$154.0 million, representing an increase of $17.8 million, or 13.0%, as compared
to consolidated net sales of $136.3 million for the three month period ended
October 1995. For the six month period ended October 1996, consolidated net
sales were $305.5 million, representing an increase of $40.4 million, or 15.3%,
as compared to consolidated net sales of $265.0 million for the six months ended
October 1995.
Superior's net sales of $116.9 million for the three months ended October
1996 were $13.9 million, or 13.5%, greater than net sales of $103.0 million for
the same period in fiscal 1996. For the six months ended October 1996, net sales
were $234.9 million, representing a $37.9 million, or 19.2%, increase over net
sales of $197.0 million for the October 1995 six month period. Adjusted for the
impact of lower copper prices in fiscal 1997 (see "Supplemental Data"included in
the industry segment operating statement data), the
increase in net sales for the October 31, 1996 three month and six month periods
would have been $20.8 million and $46.9 million, respectively. Approximately
$16.8 million and $38.0 million for the three months and six months ended
October 1996, respectively, of the copper-adjusted increase in net sales
resulted from increased sales volume of Superior's wire and cable products which
were attributable to: (1) additional sales volume under new multi-year supply
agreements entered into in the latter half of the 1996 fiscal year, and (2) the
continued increase in demand for copper wire and cable products due to growth in
new copper-based access lines and increased maintenance spending by several of
the Company's major telephone company customers. The remaining increase in net
sales of approximately $4.0 million and $8.9 million for the three months and
six months ended October 1996, respectively, resulted from non-copper based
price increases instituted in the latter half of the 1996 fiscal year.
DNE's net sales for the three months ended October 1996 were $6.0 million,
which were substantially equivalent to net sales of $6.1 million for the same
period in fiscal 1996. For the six months ended October 1996, net sales were
$11.9 million, representing a $0.5 million, or 4.5%, increase over net sales of
$11.4 million for the October 1995 six month period. Sales in DNE's contract
manufacturing service operations increased by $0.8 million and $2.1 million for
the three months and six months periods ended October 31, 1996, respectively,
offset however by a decline in sales of military avionic products.
BMI-France's net sales of $31.1 million for the three months ended October
1996 were $3.9 million, or 14.4%, greater than net sales of $27.2 million for
the same period in fiscal 1996. For the six months ended October 1996, net sales
were $58.7 million, representing an increase of $2.1 million, or 3.7%, over net
sales of $56.6 million for the October 1995 six month period. BMI-France
experienced increased sales across all of its product lines during the current
fiscal quarter ended October 1996 as compared to the comparable quarter of the
prior year. For the six month period ended October 31, 1996, the increase in net
sales was primarily attributable to increased activities at BMI-France's Furnco
construction division as well as increased sales of specialty refractory block
products primarily to the plate glass industry.
19
<PAGE>
GROSS PROFIT
Consolidated gross profit for the three month period ended October 1996 was
$27.4 million, representing an increase of $10.8 million, or 65.6%, as compared
to consolidated gross profit of $16.5 million for the three months ended October
1995. For the six month period ended October 1996, consolidated gross profit was
$51.3 million, representing an increase of $18.5 million, or 56.2%, as compared
to consolidated gross profit for the six months ended October 1995 of $32.9
million
Superior's gross profit increased by $9.8 million, or 106.4%, to $18.9
million for the three months ended October 1996, as compared to $9.2 million for
the same period in fiscal 1996. For the six months ended October 1996, gross
profit increased by $18.7 million, or 109.5%, to $35.8 million as compared to
$17.1 million for the October 1995 six month period. Superior's gross margin
percentage, based on actual net sales, increased to 16.2% and 15.3% for the
three month and six month periods ended October 1996, respectively, as compared
to 8.9% and 8.7% for the three month and six month periods ended October 1995.
(see "Supplemental Data" previously referred to for comparative period-to-period
gross margin adjusted to reflect constant copper pricing), Superior's gross
margin improvement in the current fiscal year reflects a continuing trend of
steadily improving margins that began in fiscal 1996, after the completion of
Superior's acquisition of the Alcatel business. Improvements in gross margin
achieved during the 1996 fiscal year were principally the result of increased
selling prices instituted pursuant to a majority of Superior's multi-year supply
agreements and, to a lesser degree, production efficiencies resulting from
higher production levels and cost savings from completion of the integration of
the Alcatel business operations. The continued improvement in gross margin in
fiscal 1997 is primarily due to manufacturing cost reductions and other
production efficiencies that have been achieved during the first six months of
fiscal 1997.
DNE's gross profit was $1.6 million for the three months ended October 1996,
representing a decline of $0.2 million, or 12.0%, as compared to $1.8 million
for the same period in fiscal 1996. For the six months ended October 1996, gross
profit was $3.2 million, representing a decline of $0.3 million, or 8.7%, as
compared to $3.5 million for the October 1995 six month period. DNE's gross
margin for the three month and six month periods ended October 1996 decreased to
27.1% and 26.5%, respectively, from 30.4% and 30.3% for the three months and six
months ended October 1995, respectively. The decline in gross margins resulted
primarily from a comparatively higher proportion of contract manufacturing
sales, which have a lower gross margin than DNE's other operations.
BMI-France's gross profit increased by $1.3 million, or 23.5%, to $6.8
million for the three months ended October 1996 as compared to $5.5 million for
the same period in fiscal 1996. For the six months ended October 1996, gross
profit was $12.4 million which was substantially the same as gross profit of
$12.3 million for the corresponding period in fiscal 1996. BMI-France's gross
margin increased to 21.8% for the three months ended October 1996 from 20.2% for
the same period in fiscal 1996. For the six months ended October 1996 gross
margin declined to 21.0% as compared to 21.7% for the corresponding period in
fiscal 1996. The increase in gross margin for the three months ended October
1996 reflected primarily the overall higher demand levels resulting in improved
cost absorption as well as increased revenues and gross profit at BMI-France's
Furnco and Findlay divisions, both of which generate higher gross margins than
Adience's other operations.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSE
Consolidated SG&A expense for the three month period ended October 1996 was
$11.2 million, representing an increase of $3.0 million, or 37.2%, as compared
to consolidated SG&A expense of $8.2 million for the three months ended October
1995. For the six month period ended October 1996, consolidated SG&A expense was
$21.0 million, representing an increase of $4.9 million, or 30.7%, as compared
to consolidated SG&A expense of $16.1 million for the six months ended October
1995.
Superior's SG&A expense for the three months ended October 1996 was $2.7
million, representing an increase of $0.8 million, or 45.3%, over SG&A expense
of $1.9 million for the same period in fiscal 1996. For the six months ended
October 1996, Superior's SG&A expense was $5.1 million, representing an
20
<PAGE>
increase of $1.5 million, or 40.6%, over SG&A expense of $3.6 million for the
same period in fiscal 1996. This increase in Superior's SG&A expense reflected,
among other factors, the incremental sales and marketing staff required to
support the increased level of sales and the expansion of international and
other marketing activities associated with new product lines and entering new
geographic markets.
DNE's SG&A expense for the three month and six month periods ended October
1996 was $1.7 million and $3.3 million, respectively, as compared to $1.5
million and $3.1 million, respectively, in the corresponding periods of fiscal
1996. These increases were attributable to an increase in contract manufacturing
sales expense as well as an increase in engineering expenses related to product
development and increased bid and proposal activity.
BMI-France's SG&A expense for the three months ended October 1996 was $3.8
million representing an increase of $0.2 million, or 3.7%, as compared to SG&A
expense of $3.6 million for the same period in fiscal 1996. For the six months
ended October 1996, SG&A expense was $7.7 million, representing an increase of
$0.4 million, or 6.0%, as compared to SG&A expense of $7.3 million for the same
period in fiscal 1996. BMI-France's SG&A expense increase resulted primarily
from expenses associated with the recently completed reorganization of
BMI-France's sales force, which consolidated the sales and marketing staff
across product lines and markets.
Corporate SG&A and other expense for the three months ended October 1996 was
$3.0 million representing an increase of $1.9 million as compared to SG&A
expense of $1.2 million for the same period in fiscal 1996. For the six months
ended October 1996, SG&A expense was $4.9 million, representing an increase of
$2.8 million, over SG&A expense of $2.1 million for the same period in fiscal
1996. The increase in corporate and other expenses for the October 1996 three
month and six month periods was primarily attributable to an increase in
variable-based accounting charges for certain stock and stock option grants made
in prior years, which charges were substantially impacted by the increase in the
per share market value of the Company's common stock in fiscal 1997. To a lesser
degree, the increase in corporate and other expenses was the result of increased
personnel and other costs associated with the Company's overall increase in
operations and activities.
OPERATING INCOME
Consolidated operating income increased by $7.7 million, or 99.5%, to $15.4
million during the quarter ended October 1996 as compared to the comparable
period of the preceding fiscal year. For the six months ended October 1996,
operating income increased by $13.5 million, or 86.2%, as compared to the
comparable six month period of the preceding fiscal year. The increase in
operating income was attributable to a substantial increase in Superior's net
sales and gross profit during the fiscal 1997 periods which led to an increase
in Superior's operating income of $8.8 million (126.6% increase) for the October
1996 three month period and $17.1 million (133.5% increase) for the October 1996
six month period.
INTEREST EXPENSE
During the October 1996 three month period, the Company incurred interest
expense of $6.6 million which was comparable to interest expense of $6.8 million
in the October 1995 three month period. For the six months ended October 1996,
interest expense of $13.6 million was also comparable to interest expense of
$13.9 million for the October 1996 six month period. As a result of the
transactions referred to in Notes 5 and 6 to the accompanying consolidated
financial statements and as further discussed herein under Liquidity and Capital
Resources, interest expense, which has remained constant in the first six months
of fiscal 1997 as compared to the same period in fiscal 1996, is expected to
decrease significantly in future periods.
GAIN ON SALE OF SUBSIDIARY STOCK
On October 17, 1996, the Company completed the sale of 6,000,000 shares
(amounting to 49.9% of the outstanding shares) of its Superior TeleCom
subsidiary (see Note 5 to the accompanying consolidated
21
<PAGE>
financial statements). Net cash proceeds from the sale amounted to approximately
$88.3 million and resulted in a pre-tax gain of $80.4 million which was recorded
as non-operating income. Current and deferred income tax expense related to this
transaction of $39.0 million has been included in the Company's provision for
income taxes. Thus, on an after tax basis, the net gain on sale of subsidiary
stock amounted to $41.4 million, or $2.22 per share, for the quarter ended
October 1996.
PROVISION FOR INCOME TAXES
For the three month and six month periods ended October 1996, provision for
income tax expense was $42.1 million and $44.4 million, respectively, as
compared to a provision for income taxes of $0.3 million and $0.4 million for
the same periods in fiscal 1996. Included in provision for income tax expense
for the three and six month periods ended October 1996 is $39.0 million related
to the gain on sale of subsidiary stock. The provision for income taxes
excluding taxes associated with the gain on sale of subsidiary stock would have
been $3.1 million and $5.4 million, representing an effective rate of 35.0% for
the three month and six month periods ended October 1996, respectively. This
compares with an effective tax rate of 23.4% and 16.1%, respectively, for the
three month and six month periods ended October 1995. The lower effective tax
rate for the three month and six month periods ended October 1995 was due to the
availability of tax loss carryforwards to offset substantially all of the
Company's Federal income tax liability during such periods, with only limited
tax loss carryforwards available to reduce fiscal 1997 Federal income tax
expense.
MINORITY INTEREST
As a result of the aforementioned sale of a 49.9% interest in the common
stock of Superior TeleCom, a minority interest charge of $0.3 million has been
recorded during the quarter ended October 31, 1996, representing the minority
shareholders' interest in Superior TeleCom's net income from October 17, 1996
(date of sale), through October 31, 1996.
NET INCOME FROM CONTINUING OPERATIONS
Net income from continuing operations was $46.9 million ($2.50 per share)
for the quarter ended October 1996. However, excluding the non-recurring, after
tax gain on sale of subsidiary stock, net income from continuing operations
would have been $5.5 million ($0.28 per share) for the quarter ended October
1996 as compared to net income from continuing operations of $1.0 million ($0.04
per share) for the corresponding quarter ended October 1995.
For the six month period ended October 1996, net income from continuing
operations was $51.2 million ($2.69 per share). However, excluding the after tax
gain on sale of subsidiary stock, net income for such period was $9.8 million
($0.49 per share) as compared to net income from continuing operations of $2.3
million ($0.10 per share) for the six month period ended October 1995.
The comparative increase in net income from continuing operations for the
three month and six month periods ended October 1996 was due to the significant
increase in operating income and somewhat lower interest expense offset
partially by higher incremental tax rates in the October 1996 fiscal periods.
DISCONTINUED OPERATIONS
The loss from discontinued operations recorded in the three month and six
month periods ending October 1995 related to the dividend distribution of a
substantial portion of the Company's common equity ownership in PolyVision
Corporation. As a result of the distribution, the operations of PolyVision
Corporation were reported as discontinued operations in the accompanying
consolidated financial statements.
22
<PAGE>
EXTRAORDINARY ITEM
During the six months ended October 1996 and October 1995, the Company
incurred extraordinary losses of $13.4 million and $4.9 million, respectively,
on the early extinguishment of debt. The extraordinary loss in each of the
October 1996 and 1995 fiscal periods related to major refinancings which were
completed in both fiscal 1996 and fiscal 1997. (See Note 6 to the accompanying
consolidated financial statements and Note 7 to the Company's Annual Report on
Form 10-K for the year ended April 30, 1996).
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended October 1996, the Company generated $99.1 million
in cash flow from operating activities consisting of $70.6 million in cash flow
generated from operations (net income plus non-cash charges) plus $28.5 million
in cash flow provided by net working capital changes. Excluding the impact of
the gain on sale of subsidiary stock, cash flow from operating activities would
have been $25.7 million including cash flow generated from operations (net
income plus non cash charges) of $19.6 million. Cash provided by investing
activities amounted to $1.2 million which included $7.7 million in minority
investments in subsidiary, reduced by $5.2 million in capital expenditures. Cash
used for financing activities amounted to $24.0 million, consisting of $91.6
million in repayments of long-term debt, largely as a result of the redemption
of $80.0 million recorded amount ($86.6 million face amount) of the Senior
Notes, $4.1 million in capitalized financing costs and $17.6 million used for
repurchases of Company common stock and preferred stock, offset by $65.2 million
in increased borrowings under the Company's revolving credit facilities and
$24.2 million in short term obligations incurred in the current fiscal period.
As discussed in Note 5 to the accompanying consolidated financial
statements, in October 1996, the Company completed a Reorganization involving
its two wholly owned subsidiaries, Superior and DNE. In connection with the
Reorganization, Superior TeleCom, a newly created company, became the parent
company of Superior and DNE and (i) completed an initial public offering
representing 49.9% of its outstanding common stock and generating net proceeds
of $88.3 million, and (ii) entered into a $150.0 million revolving credit
facility of which net proceeds of approximately $116.7 million were borrowed as
of the date of completion of the initial public offering. Proceeds from these
transactions aggregating $205.0 million were paid to Alpine and were applied as
follows through October 31, 1996: (i) $48.5 million was used to repay in full
Alpine's revolving credit facility, (ii) $84.8 million was used to redeem at a
premium $76.7 million face amount ($70.8 million carrying value) of Alpine's
12.25% Senior Notes ("Senior Notes"), and (iii) the balance of $71.7 million was
added to Alpine's cash reserves. As a result of the initial public offering,
Alpine's ownership of Superior TeleCom was reduced to 50.1%.
At October 31, 1996, the Company's consolidated long term debt was reduced
to $193.0 million (versus $207.6 million at April 30, 1996) with the components
of such debt, on an entity basis, consisting of the following:
<TABLE>
<CAPTION>
Long term debt obligation of:
<S> <C>
Alpine............................................................ $ 61.5
BMI-France........................................................ 7.0
Superior TeleCom and subsidiaries................................. 124.5
---------
$ 193.0
---------
</TABLE>
With the exception of Alpine's guarantee related to a $5.0 million lease
finance obligation of Superior TeleCom, Alpine does not have any direct or
indirect obligation for debt of BMI-France or Superior TeleCom
In a subsequent transaction in November 1996, Alpine redeemed an additional
$18.7 million in face amount ($17.3 million carrying value) of Senior Notes,
further reducing the Company's consolidated long term debt to $175.8 million and
reducing Alpine's component of such long term debt to $44.3 million. Cash
proceeds used for this redemption (including the payment of accrued interest)
amounted to $21.2 million.
23
<PAGE>
The Company on a consolidated basis had $85.3 million in cash and marketable
securities at October 31, 1996. Of such amount $80.8 million was maintained by
Alpine with the balance held by Adience and Superior TeleCom. As mentioned
above, $21.2 million of Alpine's cash balance was used in the November 1996
redemption of Senior Notes with an additional $24.3 million used to satisfy
other short term obligations due in November 1996. Further, included in accrued
expenses at October 31, 1996 are income taxes payable of approximately $20.0
million related to the Superior TeleCom transaction which are due by the end of
the current fiscal year.
In addition to the cash and marketable securities discussed above, Alpine
also holds approximately 6,470,000 shares (representing 50.1% common share
ownership) of Superior TeleCom (NYSE: SUT) which, based on the closing price as
reported by the New York Stock Exchange on December 6, 1996, had a market value
of approximately $116.0 million and a consolidated carrying value as recorded by
Alpine (net of minority interest) of $8.0 million. The Superior TeleCom common
stock is pledged as collateral to secure the Senior Notes.
As of October 31, 1996, Superior TeleCom had a cash balance of $3.1 million
and approximately $36.5 million in excess funds availability under its revolving
credit facility. Superior TeleCom's principal debt service commitments over the
next twelve months amount to $1.6 million and management anticipates capital
expenditures of $8.0-$8.5 million to be required over such period. On a pro
forma basis, Superior TeleCom has typically generated substantial cash flows
from operating activities. For the six months ended October 31, 1996, pro forma
cash flows from operating activities approximated $40.2 million. Management
anticipates that Superior TeleCom will be able to generate sufficient cash flows
from operating activities to meet its commitments (including principal debt
service and capital expenditures). However, should any shortfall arise due to
working capital fluctuations or other factors, cash and funds availability under
the revolving credit facility should be sufficient to cover any such shortfall.
The balance of the Company's operations, and the commitments underlying such
operations, consist of BMI-France and Alpine's corporate activities. After
completion of the debt reduction activities discussed herein, Alpine and
BMI-France will have combined debt of $51.3 million resulting in annual
principal and interest debt service commitments of $5.0 million (net of
projected investment and dividend income). Further, the cash component of
Alpine's corporate expenses (net of administrative service fees received from
Superior TeleCom) should approximate $3.5-$4.0 million annually. Management
believes that BMI-France will generate sufficient cash flows from its operations
over the next twelve months to fund such commitments, however, should any
shortfall arise, the Company believes it will have sufficient cash reserves or
other available resources to fund any such shortfall.
- ------------------------
Except for the historical information herein, the matters discussed in this
Form 10-Q include forward-looking statements that may involve a number of risks
and uncertainties. Actual results may vary significantly based on a number of
factors, including, market acceptance of new products and continuing product
demand, the impact of competitive products and pricing and, changing economic
conditions, including changes in short term interest rates and other risk
factors detailed in the Company's most recent annual report and other filings
with the Securities and Exchange Commission.
24
<PAGE>
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS ON SENIOR SECURITIES
(a) None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on October 24,
1996, for the purpose of: (i) electing two directors, and (ii) ratifying the
selection of auditors for the current fiscal year. Proxies were solicited by
management pursuant to Regulation 14 under the Securities Exchange Act of 1934.
There was no solicitation in opposition to management's proposals and nominees,
and all such proposals were adopted and nominees elected.
With respect to the re-election of Mr. John C. Jansing and Mr. Gene E. Lewis
as directors of the Company, each of them received 14,669,050 shares of common
stock and 161,000 shares of Preferred Stock representing 80% and 81%,
respectively, of the shares of each class of stock voted. Directors whose term
of office continued after the meeting were Messrs. Byers, Harrison, Janson Jr.,
Elbaum, Kanely and Schut.
With respect to the election of Arthur Andersen LLP as Company auditors'
14,666,273 shares of common stock and 161,000 shares of Preferred Stock voted in
favor and 67,787 shares of common stock and no Preferred Stock voted against,
representing 80% and 81%, respectively, of the shares of each class of stock
voted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT 27--FINANCIAL DATA SCHEDULE
EXHIBIT 28--Alpine is herewith filing as exhibits the financial statements
relating to Alpine's subsidiary, Adience, Inc., which has guaranteed Alpine's
12-1/4% Series B Senior Secured Notes due 2003, and the stock of Adience has
been pledged to secure such Notes:
ADIENCE, INC.
Unaudited Condensed Consolidated Financial Statements:
<TABLE>
<S> <C>
Condensed consolidated balance sheets at April 30, 1996 and October 31,
1996
Condensed consolidated statements of operations for the three and six
months ended October 31, 1995 and 1996
Condensed consolidated statement of shareholders' equity for the six
months ended October 31, 1996
Condensed consolidated statements of cash flows for the six months ended
October 31, 1995 and 1996
Notes to condensed consolidated financial statements
</TABLE>
(b) Reports on Form 8-K
On November 4, 1996, the Company filed a Current Report on Form 8-K with the
Securities and Exchange Commission reporting the completion of an initial
public offering for 6,000,000 shares of common stock, or 49.9%, of its
subsidiary Superior TeleCom.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ALPINE GROUP, INC.
(Registrant)
<TABLE>
<S> <C> <C>
Date: December 16, 1996 By: /s/ DAVID S. ALDRIDGE
-----------------------------------------
David S. Aldridge
CHIEF FINANCIAL OFFICER
</TABLE>
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 77,427
<SECURITIES> 7,828
<RECEIVABLES> 63,655
<ALLOWANCES> 530
<INVENTORY> 51,602
<CURRENT-ASSETS> 207,335
<PP&E> 121,014
<DEPRECIATION> 21,621
<TOTAL-ASSETS> 413,559
<CURRENT-LIABILITIES> 131,885
<BONDS> 61,414
0
3,758
<COMMON> 1,841
<OTHER-SE> 59,494
<TOTAL-LIABILITY-AND-EQUITY> 413,559
<SALES> 305,466
<TOTAL-REVENUES> 305,466
<CGS> 254,143
<TOTAL-COSTS> 254,143
<OTHER-EXPENSES> 80,392
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (13,609)
<INCOME-PRETAX> 95,922
<INCOME-TAX> (44,402)
<INCOME-CONTINUING> 51,520
<DISCONTINUED> 0
<EXTRAORDINARY> (13,412)
<CHANGES> 0
<NET-INCOME> 37,775
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.70
</TABLE>
<PAGE>
EXHIBIT 28
ADIENCE, INC.
(A WHOLLY-OWNED SUBSIDIARY
OF THE ALPINE GROUP, INC.)
UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
OCTOBER 31, 1996
27
<PAGE>
ADIENCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1996
--------- -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................................... $ 412 $ 1,420
Accounts receivable (less allowance for doubtful accounts; April, $340; October $359)................... 17,183 20,046
Inventories............................................................................................. 11,264 13,640
Other current assets.................................................................................... 5,668 5,254
--------- -----------
Total current assets.................................................................................. 34,527 40,360
--------- -----------
Property, plant and equipment, net........................................................................ 22,751 22,491
Goodwill (less accumulated amortization; April, $1,761; October $2,423)................................... 38,030 37,525
Note receivable from affiliate............................................................................ 2,049 --
Other long-term assets.................................................................................... 1,603 1,692
--------- -----------
Total assets.......................................................................................... $ 98,960 $102,068
--------- -----------
--------- -----------
</TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Current portion of long-term debt..................................... $ 844 $ 915
Accounts payable...................................................... 7,909 6,801
Accrued expenses and other liabilities................................ 18,203 16,067
--------- -----------
Total current liabilities........................................... 26,956 23,783
--------- -----------
Notes payable to parent................................................. 54,908 62,099
--------- -----------
Due to parent........................................................... 6,133 6,512
--------- -----------
Long-term debt, less current portion.................................... 6,258 6,058
--------- -----------
Other long-term liabilities............................................. 2,968 2,291
--------- -----------
Commitments and contingencies
Stockholder's equity:
Common stock, par value $1.00; 1,000 authorized, 10 shares issued at
April 30, 1996 and October 31, 1996................................. -- --
Additional paid-in capital............................................ 5,710 5,710
Cumulative translation adjustment..................................... 132 223
Accumulated deficit................................................... (4,105) (4,608)
--------- -----------
Total stockholder's equity.......................................... 1,737 1,325
--------- -----------
Total liabilities and stockholder's equity.......................... $ 98,960 $ 102,068
--------- -----------
--------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
28
<PAGE>
ADIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Net sales................................................................................... $ 27,176 $ 31,093
Cost of goods sold.......................................................................... 21,693 24,319
--------- ---------
Gross profit.............................................................................. 5,483 6,774
Selling, general, and administrative........................................................ 3,630 3,763
Amortization of goodwill.................................................................... 312 333
--------- ---------
Operating income (loss)................................................................... 1,541 2,678
Interest income............................................................................. 200 2
Interest (expense).......................................................................... (2,129) (2,244)
--------- ---------
Income (loss) from continuing operations before income taxes and extraordinary item......... (388) 436
Income taxes................................................................................ 106 75
--------- ---------
Net income (loss)......................................................................... $ (494) $ 361
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Net sales................................................................................... $ 56,636 $ 58,716
Cost of goods sold.......................................................................... 44,328 46,355
--------- ---------
Gross profit.............................................................................. 12,308 12,361
Selling, general, and administrative expense................................................ 7,284 7,719
Amortization of intangible asset............................................................ 623 662
--------- ---------
Operating income (loss)................................................................... 4,401 3,980
Interest and other income................................................................... 315 26
Interest (expense).......................................................................... (4,248) (4,384)
--------- ---------
Income (loss) from continuing operations before income taxes and extraordinary item......... 468 (378)
Income taxes................................................................................ 318 125
--------- ---------
Income (loss) from continuing operations before extraordinary item........................ 150 (503)
Extraordinary (loss) on early extinguishment................................................ (158) --
--------- ---------
Net income (loss)........................................................................... $ (8) $ (503)
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
29
<PAGE>
ADIENCE, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH ENDED OCTOBER 31, 1996
(UNAUDITED)
(IN THOUSANDS
<TABLE>
<CAPTION>
I
ADDITIONAL RETAINED FOREIGN TOTAL
COMMON PAID IN EARNINGS CURRENCY SHAREHOLDERS'
STOCK CAPITAL (DEFICIT) TRANSLATION EQUITY
--------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1996.......................... $ -- $ 5,710 $ (4,105) $ 132 $ 1,737
Net income (loss).................................. (503) (503)
Foreign currency translation adjustment............ 91 91
--------- ----------- ----------- ----- ------
Balance at October 31, 1996........................ $ -- $ 5,710 $ (4,608) $ 223 $ 1,325
--------- ----------- ----------- ----- ------
--------- ----------- ----------- ----- ------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
30
<PAGE>
ADIENCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
OCT. 31, OCT. 31,
1995 1996
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net (loss)................................................................................ $ (8) $ (503)
Non-cash expenses and revenues included in income (loss):
Depreciation and amortization........................................................... 2,143 2,230
Provision for doubtful accounts......................................................... 90 18
(Gain) loss on disposal of property, plant and equipment................................ 2 49
Changes in operating assets and liabilities:
Accounts receivable..................................................................... (618) (2,881)
Inventories, prepaid expenses, deposits and other....................................... (631) (1,435)
Costs and estimated earnings in excess of billings on uncompleted contracts............. (467) (497)
Accounts payable, salaries, wages and withholdings, accrued expenses, accrued insurance,
accrued interest, income tax payable and payable to principal shareholder............. (4,018) (2,467)
Billings in excess of costs and estimated earnings on uncompleted contracts............... 100 106
Other..................................................................................... (376) (1,014)
---------- ---------
Net cash (used for) by operating activities................................................. (3,783) (6,394)
---------- ---------
Cash flow from investing activities:
Purchase of property, plant and equipment................................................. (1,190) (1,344)
Proceeds from sale of assets.............................................................. 308 35
Other..................................................................................... (151) (201)
---------- ---------
Net cash (used for) investing activities.................................................... (1,033) (1,510)
---------- ---------
Cash flow from financing activities:
Net borrowings (payments) on revolving line of credit..................................... (2,475) 5,958
Net borrowings (payments) on long-term debt............................................... (41,011) (707)
Net borrowings (payments) from The Alpine Group, Inc...................................... 49,058 3,661
---------- ---------
Net cash provided by financing activities................................................... 5,572 8,912
---------- ---------
Net decrease in cash and cash equivalents................................................... 756 1,008
Cash and cash equivalents at beginning of period............................................ 1,974 412
---------- ---------
Cash and cash equivalents at end of period.................................................. $ 2,730 $ 1,420
---------- ---------
---------- ---------
Supplemental disclosures:
Cash paid (or charged by The Alpine Group, Inc.) for interest............................. $ 4,090 $ 4,425
---------- ---------
---------- ---------
Cash paid for taxes....................................................................... $ 295 $ 271
---------- ---------
---------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
31
<PAGE>
ADIENCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Adience reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of the results of operations for the interim
periods presented. These financial statements should be read in conjunction with
the summary of significant accounting policies and the notes to the financial
statements included in Adience's audited financial statements for the year ended
April 30, 1996.
2. INVENTORIES
The components of inventories are:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1996
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Raw material.......................................................... $ 3,799 $ 4,593
Work-in-process....................................................... 1,654 1,495
Finished goods........................................................ 5,811 7,552
--------- -----------
$ 11,264 $ 13,640
--------- -----------
--------- -----------
</TABLE>
32
